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EDITORIAL COMMENT: It Pays To Give Africa's Wealth Prospects Close Attention
Tom Burroughes
18 December 2013
For far too long Africa has suffered from a troubled image and probably won’t have been the first place to come up
in conversation among wealth managers prospecting for business. But in recent
months, the volume of positive noise about the continent has risen. I hear from recruiters that there is considerable interest
in bankers and relationship managers with knowledge of markets in places such
as Nigeria and Kenya, for
example. More than once I have been asked something on the lines of “do you
know any decent Africa wealth managers?” The economic backdrop has been encouraging. The MSCI EFM
Africa ex-ZA Index of equities shows total
returns (reinvested dividends plus capital gains) of 15.75 per cent; on a
five-year annualised basis, that index has chalked up a very respectable 8.7
per cent. In this year’s annual World
Wealth Report survey by RBC Wealth Management and Capgemini, Africa had a total high net worth ($1 million-plus
investable assets) of 140,000 with total wealth of $1.3 trillion. Perhaps more
significantly, its growth rate in the number of such millionaires – 9.9 per
cent – was faster than the global growth pace of 9.2 per cent. The actual total
amount of wealth rose by 11.5 per cent, faster than the global average of 10
per cent. South Africa,
Egypt and Nigeria have tens of thousands of millionaires,
while other countries like Ethiopia
and Ghana
are climbing the wealth statistics. According to an analysis of the African
high net worth community by New World Wealth, an Oxford-based wealth
consultancy, Ethiopia has
been the fastest growing African market for millionaires over the past six
years followed by Angola, Tanzania, Zambia
and then Ghana. Adding to the noise around Africa
recently was the story that has also opened offices in countries such as Nigeria and has a presence in other parts of the continent. (This is perhaps unsurprising given the traditional French ties to north and west Africa, for example.) is going after wealthy clients in Nigeria and Angola, for example. Switzerland's largest bank recently told Bloomberg of the "tons of opportunities still relatively untapped". The bank said it sees potential in nations such as Kenya, Ghana, Uganda and Botswana. What excites bankers is that although sub-Saharan Africa, for example, is relatively “under-banked” – only about
a quarter of its population have a bank account at all – the upside potential
if growth can produce a large, and expanding middle class is considerable. There
are, of course, considerable challenges. Africa
suffers still from a reputation (it varies a lot between countries) for
corruption and poor governance, and unevenly enforced property rights. The global
drive against money laundering and push for more due diligence about client suitability
has a long way to go there, to put it mildly. For all such concerns, some banks with strong roots in the
continent are expanding their coverage. South Africa-headquartered (not to be confused with Standard Chartered, another strong player in
Africa) has made a number of recent appointments, naming a
business development head for Africa. Barclays'
South African unit, Barclays Africa Group
(formerly Absa Group), is combining its wealth, asset management, stock broking
and investment administration businesses; earlier in 2013, Barclays raised its
stake in Absa, explaining that it sees business prospects in the continent are
strong. China Another continued theme in Africa worth monitoring is the
role of China,
both as an investor, and potential partner. China has been a big buyer of land
and raw material supplies in parts of the continent to fuel its voracious
demand – although a deceleration of Chinese economic growth may have had some
impact. In September, South Africa’s
and Bank of China entered a strategic agreement to boost trade and
investment between Africa and China. In the past, any sign of faster wealth growth would lead
people to assume that such money would find its way to secret bank accounts in
places such as Switzerland.
This may change not just due to inter-governmental deals on tax information
exchange and the erosion of bank secrecy, but if there are real signs of
progress in reducing corruption and attacks on property rights in Africa. Clearly, the upheavals in the north of the
continent – the so-called “Arab Spring” – will give bankers pause. Nigeria suffers
from ethnic and religious strife. This article from the Economist (December, 2011) contains a passage that does show,
however, how far the region has come: “Africa
is still not entirely peaceful and democratic. But it has made huge strides.
The dead hand of the Soviet Union is gone; countries such as Mozambique and Ethiopia have given up on Marxism.
The dictators, such as Congo's
leopard-skin-fez-wearing Mobutu Sese Seko, that superpowers once propped up
have fallen. Civil wars like the one which crippled Angola have mostly ended. Two out
of three African countries now hold elections, though they are not always free
and fair.” Africa has a mountain of
challenges, but they appear less intractable than might have been the case over
a decade ago. If developments continue in the right direction, then wealth
management firms around the world will have to become better acquainted
with it, and soon.